Informed Finance and Technological Conservatism
AbstractThis paper studies an economy in which firms can operate either a mature or a new technology and lenders acquire information on the productive assets of the borrowing firms that are eligible as collateral. We demonstrate that when contracts are imperfectly enforceable informed lenders offer inexpensive funding for the mature technology but may choose not to finance the new one, seeking to preserve the value of their information on the mature assets. Using firm-level data from Italy, we find that banks that establish long-term relationships with firms promote technological progress on average. However, we find that relationship banks inhibit innovations that entail a large depreciation of existing technology-specific information such as radical innovations. Copyright 2010, Oxford University Press.
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Bibliographic InfoArticle provided by European Finance Association in its journal Review of Finance.
Volume (Year): 15 (2010)
Issue (Month): 3 ()
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- Pierluigi Murro, 2013.
"The Determinants Of Innovation: What Is The Role Of Risk?,"
University of Manchester, vol. 81(3), pages 293-323, 06.
- Pierluigi Murro, 2010. "The determinants of innovation: What is the role of risk?," series 0032, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Jul 2010.
- Raoul Minetti & Pierluigi Murro & Monica Paiella, 2011.
"Ownership structure, governance, and innovation: Evidence from Italy,"
1_2011, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Raoul Minetti & Pierluigi Murro & Monica Paiella, 2012. "Ownership Structure, Governance, and Innovation: Evidence from Italy," Working Papers 10, Department of the Treasury, Ministry of the Economy and of Finance.
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